On 16 May 2024, the Network for Greening the Financial System (NGFS) published a cover report and two technical documents on Sustainable and Responsible Investment (SRI) for Central Banks.

The cover report reviews SRI in central banks’ portfolio management, with practices and recommendations. It puts forward ten recommendations for central banks to deepen their understanding of SRI policies and improve their SRI practices. These are based on a step-by-step approach (Measure, Act and Evaluate), inspired by the climate framework of the United Nations Principles for Responsible Investment. A wide variety of case studies is included in the cover report to encourage those central banks that have not yet embraced SRI practices to lever off the experience gained by first movers. Similarly, central banks at the forefront are challenged to further enhance their SRI practices with the aim of meeting the goals of the Paris Agreement.

The ten recommendations draw on insights from earlier NGFS publications, as well as case studies, market intelligence, academic literature and a survey amongst NGFS members. Notably, the survey showed that over the past three years, many central banks have taken steps to formalise their SRI policies, further embed sustainability considerations in their governance structures and report more consistently on climate-related risks and opportunities.

The two technical documents provide deep dives into ways for central banks to take climate change into account in their non-monetary investments in corporates or in sovereign debt. The first technical document (Decarbonisation strategies for corporate portfolios of central banks) discusses how central banks can integrate net-zero considerations into their investments in equity and corporate bonds. It also explores several challenges that central banks face when implementing these strategies.

The second document (Considering climate-related risks and transition impact in the sovereign investments of central banks) looks at sovereign debt. It describes available metrics that can inform strategies to capture climate-related risks, opportunities, and impacts on central banks’ sovereign holdings. It also offers advice on implementing these strategies.

Dr Sabine Mauderer, Chair of the NGFS, Member of the Executive Board of the Deutsche Bundesbank: 

“Central banks ought to understand and respond to the risks that climate change poses for the integrity of their balance sheets. Aligning our own portfolios with sustainable and responsible investment (SRI) practices can help us to meet this challenge. The results of the NGFS’s survey show that central banks across the world are adopting SRI practices – which is laudable – but that many are still at an early stage of implementation. The reports offer practical guidance and recommendations to make us all more effective in tackling the risks resulting from climate change.”